ALLIANZ CORNHILL INFORMATION SERVICES PRIVATE LIMITED V. UNION OF INDIA

WP(C)/28113/2016

AI Insights

The case revolves around a writ petition filed by Allianz Cornhill Information Services Private Limited challenging a reassessment notice issued by the Income Tax authorities for the assessment year 2009-10. The petitioner, engaged in software development and a 100% export-oriented unit, had claimed deductions under Section 10B of the Income Tax Act, which were initially allowed for certain years but disallowed for 2009-10. The reassessment notice was issued after a significant delay and was based on the same disallowed claim, leading the petitioner to contest its validity. The court examined whether the reassessment was within the legal timeframe and if the necessary conditions for such a reassessment were fulfilled.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 724765 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 22-12-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: M NAMBIAR
• Keywords: Deduction under section 10B; Export oriented unit; Income Tax; Jurisdiction; Notice under section 148; Reassessment; Software Development
• Section: 147; 148; 144C; 10B; 10A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN FRIDAY, THE 22ND DAY OF DECEMBER 2023 / 1ST POUSHA, 1945 WP(C) NO. 28113 OF 2016 PETITIONER: ALLIANZ CORNHILL INFORMATION SERVICES PRIVATE LIMITED TECHNO PARK, TRIVANDRUM , REPRESENTED BY ITS CHIEF FINANCIAL OFFICER, MR.KRISHNA RAMACHANDRAN. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.P.GOPINATH SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.RAJA KANNAN RESPONDENTS: 1 UNION OF INDIA REPRESENTED BY THE SECRETARY, MINISTRY OF FINANCE, (DEPARTMENT OF REVENUE) NORTH BLOCK, NEW DELHI-110001. 2 THE COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM, PIN-695003. 3 THE ASSISTANT COMMISSIONER OF INCOME TAX RANGE-1, AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695003. 4 THE JOINT COMMISSIONER OF INCOME TAX SPECIAL RANGE, AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM- 695003. BY STANDING COUNSEL CHRISTOPHER ABRAHAM THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 22.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) No. 28113 of 2016 ..2.. JUDGMENT This writ petition has been filed by the petitioner challenging the order passed by the assessing authority under the provisions of the Income Tax Act, 1961 (for short, “the Act”), on the ground that it is issued beyond the period fixed under the first proviso to Section 147 of the Act. 2. Brief facts of the case are as follows:- The petitioner, an assessee on the rolls of the third respondent under the provisions of the Act, is engaged in the business of software development services and business process & computer services to its associated enterprises. The petitioner is a 100% export- oriented unit (EOU) and in connection with its WP(C) No. 28113 of 2016 ..3.. business activities, they obtained registration as a new Software Technology Park of India (STPI) unit in TechnoPark, Thiruvananthapuram. Being a 100% export-oriented unit, the petitioner was claiming the benefit of deduction envisaged under Section 10B of the Act. Subject to the compliance of the conditions under Section 10B of the Act, the said deduction was to run consecutively for a period of ten years, which was allowed from the assessment years, 2004-05 to 2008-09. For the assessment year 2009-10, the petitioner filed return on 29.09.2009 making a similar claim of deduction under Section 10B to the tune of Rs.9,01,48,229/-. However, while completing the assessment, the assessing officer issued a draft assessment order dated 21.03.2013, disallowing the claim of deduction under Section 10B of the Act, which was received by WP(C) No. 28113 of 2016 ..4.. the petitioner on 27.03.2013. On receipt, the petitioner filed objections before the Dispute Resolution Panel and the Assessing Officer in terms of Sub-section (2) of Section 144C of the Act. The Dispute Resolution Panel considered the objections raised by the petitioner and issued directions on 09.12.2013 to the Assessing Authority as contemplated in Sub- section (5) of Section 144C of the Act, which was served on the petitioner on 27.12.2013. However, the assessing authority passed Ext.P1 consequential order in terms of sub-section (13) of Section 144C of the Act on 27.03.2014, against which the petitioner obtained an interim stay by filing WP(C) No.10427 of 2014. Despite the interim stay of Ext.P1 order, the fourth respondent issued Ext.P3 notice proposing reassessment of income escaped assessment for the financial year, 2009-10, and WP(C) No. 28113 of 2016 ..5.. required the petitioner to file return, in compliance of which, the petitioner filed return revising the claim made under Section 10B to Section 10A of the Act and requested the fourth respondent to give detailed reasons for reassessment. The fourth respondent issued Ext.P4 letter giving reasons for reassessment, wherein the lapse of four years for reassessment has been admitted. Though the petitioner filed Ext.P5 objections, the fourth respondent issued Ext.P6 letter, rejecting the objections and intimating that reassessment proposed is as per law. It is challenging this, the petitioner has approached this Court with the writ petition. 3. Heard Sri.Raja Kannan, learned counsel appearing for the petitioner; and Sri.Christopher Abraham, learned Senior WP(C) No. 28113 of 2016 ..6.. Standing Counsel for the respondents. 4. Learned counsel for the petitioner submitted that for reopening the assessment for the assessment year 2009-10, there is no cumulative satisfaction or fulfilment of the twin conditions as mandated under the first proviso to Section 147 of the Act. Learned counsel also submitted that for invocation of Section 147 of the Act, the ‘escapement of income’ referred is the claim under Section 10B of the Act, which itself stood disallowed vide Ext.P1 order dated 27.3.2014. Learned counsel further submitted that there was no fresh material or new information to reopen the assessment by the assessing authority under Section 147 of the Act and that, for reassessment proceedings to be initiated beyond the period of four years from the end of the WP(C) No. 28113 of 2016 ..7.. relevant assessment year to be valid, the twin conditions under the first proviso to Section 147 of the Act are to be mandatorily satisfied. The assessing authority must have reason to believe that the twin conditions were satisfied viz., (1) any income chargeable to tax has escaped assessment for such assessment year; and (2) such escapement of income is by reason of the failure on the part of the assessee to make a return or respond to statutory notices or to disclose fully and truly all material facts necessary for such assessment for that assessment year. There is no ‘escapement of income’ in the present case, necessitating the invocation of Section 147 of the Act as Section 10B claim already stood disallowed in Ext.P1 order of assessment dated 27.03.2014. It is the very same claim that forms the sole basis of the re-opening of the assessment for the WP(C) No. 28113 of 2016 ..8.. assessment year 2009-10. In Ext.P1 order, the assessing officer had already formed an opinion with respect to the claim made under Section 10B after due verification of the records submitted. The petitioner had already disclosed the claim under Section 10B which was considered by the assessing officer and Ext.P1 order was passed. Hence, according to the learned counsel for the petitioner, Ext.P3 notice under Section 148 of the Act is without jurisdiction. 5. I have considered the arguments put forward by the learned counsel for the petitioner. 6. The petitioner is engaged in the business of software development services and business process and computer services to its associated enterprises. Being a 100% export- WP(C) No. 28113 of 2016 ..9.. oriented undertaking, the petitioner claimed the benefit of deduction under Section 10B of the Act. For the assessment years 2004-05 to 2008-09, the said benefit was allowed. For the assessment year 2009-10 also, the petitioner filed a return claiming deduction under Section 10B of the Act. The said claim was considered by the assessing officer and a draft assessment order dated 21.03.2013 was passed disallowing the claim of deduction under Section 10B of the Act. On receipt of the said draft assessment order, the petitioner filed an objection before the Dispute Resolution Panel and the Assessing Officer under Section 144C of the Act. The Dispute Resolution Panel considered the objections raised by the petitioner and issued directions on 09.12.2013 to the assessing authority as contemplated under sub-section (5) of Section 144C of the Act. Thereafter, Ext.P1 WP(C) No. 28113 of 2016 ..10.. special order was passed by the assessing officer on 27.03.2014, which is challenged in WP(C) No.10427 of 2014. Pursuant to Ext.P1 special order passed by the assessing authority, Ext.P3 notice dated 02.12.2015 was issued to the petitioner by the fourth respondent under Section 148 of the Act and Ext.P4 letter dated 1.2.2016 was issued by the fourth respondent giving reasons for the reassessment. On receipt of Exts.P3 and P4, the petitioner filed Ext.P5 objection mainly contending that the notice under Section 148, after the expiry of four years from the end of the relevant assessment year is bad in law. 7. For a better understanding of the provision, it is relevant to refer to Section 147 of the Income Tax Act. WP(C) No. 28113 of 2016 ..11.. “147.Income escaping assessment.-- If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section(3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section139 or in response to a notice issued under sub- section(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.” 8. On a perusal of the said provision, it is seen that for reassessment proceedings initiated beyond the period of four years, the assessing authority must have reason to believe that any income chargeable to tax has escaped assessment for such assessment year by reason WP(C) No. 28113 of 2016 ..12.. of the failure on the part of the assessee to make a return under Section 139 or respond to statutory notice or to disclose fully and truly all material facts necessary for such assessment for that assessment year. In the case in question, the assessing authority passed the draft assessment order on 21.03.2013. Thereafter, Ext.P1 order under Section 144C dated 27.3.2014 was passed. Hence, it is clear that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. In Ext.P4 letter, the assessing authority has not stated that there was failure on the part of the assessee to make a return under Section 139 or respond to statutory notice or to disclose fully and truly all material facts necessary for such assessment for that assessment year. WP(C) No. 28113 of 2016 ..13.. If the above twin conditions are not satisfied, the notice ought to have been issued within four years from the date of the relevant assessment year. Here, the relevant assessment year is 2009-10. The notice ought to have been issued before 31.03.2014. Ext.P3 notice under Section 148 of the Act was issued on 02.12.2015, after four years from the end of the relevant assessment year. Moreover, the reopening of the assessment is fully based on an already disallowed claim. In the absence of the element of escapement of income, the reassessment proceedings are wholly without authority of law. Hence, I am of the view that the reassessment proceedings initiated are beyond the period of four years from 31.3.2010, and are wholly without jurisdiction, and are liable to be set aside. WP(C) No. 28113 of 2016 ..14.. Accordingly, the writ petition is allowed. Ext.P6 letter issued by the fourth respondent is hereby set aside. Sd/- SHOBA ANNAMMA EAPEN JUDGE MBS/- WP(C) No. 28113 of 2016 ..15.. APPENDIX OF WP(C) 28113/2016 PETITIONER'S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER DTD 27/3/2014 WHICH WAS SERVED ON THE PETITIONER ON 31/3/2014 EXHIBIT P2 TRUE COPY OF THE ORDER DTD 6/6/2014 PASSED BY THIS HON'BLE COURT IN WPC NO 10427/2014 EXHIBIT P3 TRUE COPY OF THE NOTICE DTD 2/12/2015 ISSUED BY THE 4TH RESPONDENT U/S 148 OF THE ACT, FOR THE YEAR 2009-10. EXHIBIT P4 TRUE COPY OF THE LETTER DTD 1/2/2016 ISSUED BY THE 4TH RESPONDENT GIVING REASONS FOR RE- ASSESSMENT. EXHIBIT P5 TRUE COPY OF THE OBJECTIONS(WITHOUT ANNEXURES)FILED BY THE PETITIONER VIDE LETTER DTD 9/3/2016, AGAINST EXT P4 LETTER ISSUED BY THE 4TH RESPONDENT. EXHIBIT P6 TRUE COPY OF THE LETTER DTD 28/6/2016 ISSUED BY THE 4TH RESPONDENT. "